This year hasn't just been a good one for IonQ (IONQ 9.66%) shareholders. It's been a great one. The computing-technology stock is up more than 300% since the end of 2022, and seemingly still going strong.
As the old adage goes, though, past performance is no guarantee of future results. There's no assurance IonQ will repeat the feat in the coming year.
Even so, shares of the market-beating company could still easily outpace whatever marketwide gains are in the cards for 2024, making the stock a compelling -- even if somewhat speculative -- buy. Here's why.
IonQ is on a roll
You've probably heard the term "quantum computing" tossed around in the past few years. What you've probably not heard is much about the commercialization of quantum computing solutions. Although the potential of subatomic particles as a computing medium is incredible, it's also just too darn difficult to make it practical and affordable.
That is, until now. While a company called D-Wave was the first to introduce quantum computing to commercial clients and IBM become the first major player to unveil such tech back in 2019, IonQ is arguably the name in the business to take most seriously. After all, it's also the stock market's "first publicly traded, pure-play quantum computing company," according to the company.
Perhaps more important, customers are lining up, money in hand. The company booked $6.1 million worth of business during the quarter ended in September, more than doubling its top line on a year-over-year basis, and extending a growth trend that's been in place for all of 2023.
IONQ Revenue (Quarterly) data by YCharts
IonQ's total bookings jumped by $26.3 million last quarter as well, accelerating to a year-to-date total of $58.4 million.
This growth only scratches the surface of what could happen, however. The company continues to refine its portfolio of quantum computing platforms. Last quarter it unveiled the #AQ (algorithmic qubits) 35 Forte Enterprise computer as well as its #AQ 64 Tempo. The former is designed for hybrid data centers that also still rely on conventional binary-computing systems. The latter will come to the market in 2025, offering "more available, useful computational states than any computer in history." As such it should be able to handle the heavier-duty computing loads many clients may not even be envisioning yet.
The analyst community is calling for top-line growth of nearly 80% from IonQ next year following this year's 95% revenue growth.
The quantum computing tailwind is already blowing
It's still not a great stock pick for everyone's portfolio, for the record. IonQ is likely to remain in the red through 2026, with its losses expected to widen rather than contract next year before finally starting to curb in 2025. But even then, don't count on any actual net profits until 2027. The stock's apt to remain volatile and unpredictable until then, and perhaps after that.
Data source: StockAnalysis.com. Chart by author.
If you can stomach the wild ride in the meantime, however, it may well be worth it.
See, although it's a relatively new and somewhat unproven idea, quantum computing is real enough to spur significant growth outlooks. Precedence Research, for instance, believes the quantum computing market will expand at an average annual pace of roughly 37% between last year and 2030, growing from 2022's tally of $10 billion to $125 billion by then. And that outlook jibes with several others.
All of these outlooks are rooted in the same core thesis, though. That's the power and potential of quantum computing itself. It will redefine how the world sees and uses computers, by virtue of doing what conventional computers just can't. It's showing particularly great promise in areas like enhancing artificial intelligence, bolstering cybersecurity, figuring out how and why proteins do what they do, designing better lithium-based batteries for electric vehicles, optimizing traffic flow, and even predicting the weather.
The next big step isn't figuring out how to use subatomic particles to make more computations faster, or even designing algorithms that create useful, actionable data -- that's already been done. The next big step is giving prospective paying customers the tools they need to do something constructive with quantum computing.
The thing is, IonQ is already doing this, too. It's partnered with General Electric to help minimize its exposure to unseen financial risk, and is helping chemical company Dow develop new materials. The U.S. Air Force is already a big customer of the company's as well, helping this arm of the country's armed forces develop better battlefield capabilities. IonQ simply needs to keep explaining the potential of its technology to more prospective customers.
A buy, but only for certain investors
Again, it's not for everyone. Aside from the unpredictability that comes with being a young company operating in a young industry, plugging into the underlying quantum computing trend requires a long-term mindset and a willingness to shrug off short-term swings. That's easier said than done when a stock is suddenly losing a lot of ground for no clear reason.
The bigger-picture thesis is still bullish for long-term investors with an appetite for risk, however.
As was noted, IonQ is the only real pure play in the quantum computing business, and its current market cap of roughly $3 billion is a pittance compared to the quantum computing market's projected growth. Most of that growth will take shape beginning a few years from now, but wise investors know they can't wait until then to jump in since stocks often predict the future rather than reflect the present.
Bottom line? It would be surprising if IonQ shares didn't outperform the S&P 500 in 2024 no matter how well or how poorly the index is due to perform. Just keep in mind IonQ stock will also be far more volatile than the S&P 500 is apt to be in the coming year.
